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SUMMER PROJECT ON FIXED ASSET MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE COURSE MASTER OF MANAGEMENT STUDIES UNIVERSITYOF

MUMBAI SUBMITTED BY ROHIT VIKRAM GUJAR ROLL NO-201131 BATCH-2011-13

SPECIALIZATION FINANCE UNDER THE GUIDANCE OF Prof. AMOL NADGAONKAR VISHWESHWAR EDUCATION SOCIETY INDIRA INSTITUTE OF BUSINESS MANAGEMENT SANPADA, NAVI MUMBAI

. SUMMER PROJECT ON FIXED ASSET MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE COURSE MASTER OF MANAGEMENT STUDIES UNIVERSITYOF MUMBAI SUBMITTED BY ROHIT VIKRAM GUJAR ROLL NO -201131 BATCH- 2011-13

SPECIALIZATION FINANCE UNDER THE GUIDANCE OF Prof. AMOL NADGAONKAR VISHWESHWAR EDUCATION SOCIETYS INDIRA INSTITUTE OF BUSINESS MANAGEMENT SANPADA, NAVI MUMBAI

[The manager/ authority under whom the project has been conducted will give the following certificate on company/ organization letter head.]

I Mr./Ms------------------------ certify that Mr. Rohit Vikram Gujar student of Indira Institute of Business Management (IIBM) Sanpada, has worked under my guidance for the project titled Fixed Asset Management from 5th May to 30th July and has successfully completed the project work in partial fulfillment of requirement for the completion of MMS course as prescribed by University of Mumbai. This project report is a record of authentic work carried out by him. I have gone through the project and it is to my satisfaction.

Name of the guide

Date

Designation

Company/organization

CERTIFICATE

It is hereby certified that the Project Report on FIXED ASSET MANAGEMENT has been successfully completed in MMS semester II, Batch 2011-13, for the academic year by Mr. ROHIT VIKRAM GUJAR under the guidance of Prof. AMOL NADGAOKAR.

Prof. AMOL NADGAONKAR (Project Guide)

RITU BHATTACHARYA Director IIBM

AKNOWLEDGEMENT
I express my profound sense of gratitude and sincere thanks to the management of S.L.RAHEJA HOSPITAL (A FORTIS ASSOCIATE) for having offered me an opportunity to work as a summer intern, on this project in their esteemed organization. I extend my special thanks to MR SUNIL KHANNA who gave me a wonderful opportunity to select and work on the topic and understand the challenges which was face in our career path while dealing with the people and the complexities of the job. I would also express my sincere thanks to our Director Ritu Bhattacharya, and Deputy Director Corporate Relations Prof. Vidhya Srinivas for enabling me to undertake such excellent project, and to work under such eminent person in the S.L.Raheja Hospital ( A Fortis Associate ) organization. I would like to express my gratitude to my Mentor / Guide Prof AMOL NADGAOKAR for giving his/her valuable guidance and inputs which help me in successful completion of the project.

Mr.__________________ MMS (specialization)

DECLARATION

I wish to state that the work embodied in this

Project titled

____________________________________________________________ ____________ forms my own contribution to Management. Wherever references have been made to intellectual properties of any individual / Institution / Government / Private / Public Bodies / Universities, research paper, text books, reference books, research monographs, archives of newspapers, corporate, individuals, business / Government and any other source of intellectual properties viz., speeches, quotations, conference proceedings, extracts from the website, working paper, seminal work et al, they have been clearly indicated, duly acknowledged and included in the Bibliography.

_________________________ Signature of candidate

ABSTRACT

The project Fixed Assets Management is defined as the selling of the assets which are Idle or which are not in the production use. It refers to removing of the assets from the Fixed Asset Register which are not in use or which are costing high on repairs and maintenance cost. It mainly focuses on financial saving through discarding the obsolete and used assets.

PURPOSE OF THE PROJECT

To study the accounting of Fixed Assets as per AS- 10, Accounting of the Depreciation on Fixed Assets AS- 6. To check whether the method of depreciation for the FIXED ASSETS is appropriate as per the Companies Act, 1956. To review the Fixed Asset Register and to check for any errors in the register. To review the assets which can be physically disposed off in the fiscal year 201213 To provide the information regarding the procedure of disposal of particular fixed assets and give information about the different methods through which disposal can be done. For Example: sale by public tender, sale though company agent, donating, etc

A PROJECT REPORT ON FIXED ASSETS MANAGEMENT UNDERTAKEN AT Fortis (S.L.Raheja) Hospital) Table of content Particular Executive Summary Overview and Company Profile Background of the Company Company Profile A) Values of S .L Raheja B)Vision and mission of Raheja C)Hierarchy D)Branches 3 3 3.1 Introduction of the topic A]Objectives of the study B]Scope of the study C]Salient contribution of the study Research Methodology Concepts related to Fixed Assets

Sr. no 1 2

Chapter no: 1 2 2.1 2.2

Page no:

4 5

4 5

6 6.1

Overview of Process Overview of Department

Fixed Assets Register A]Objectives B]Identification of fixed assets C]Key responsibilities of fixed assets manager/officer

8 9

8 8.1 9

Planning for fixed assets Service life of fixed asset Depreciation i]Characteristics ii]Causes iii]Objectives of making provision for fixed assets iv]Basis of charges

9.1 10 11 10 11 11.1

Methods of Depreciation Advantages of Fixed Assets Management Legal aspects of purchasing Fixed Assets International Purchasing i] Bill of lading ii] Letter of credit iii] Documents required for payment Data Analysis and Interpretation Conclusions Limitations Suggestions and Recommendations Bibliography

12 13 14 15 16

12 13 14 15 16

CHAPTER 1 EXECUTIVE SUMMARY


This project has been a great learning experience for me; at the same time it gave me enough scope to implement my analytical ability. The analysis and advice presented in this Project Report entitled as Fixed Assets Management is based on the research analysis done and also having a survey of the fixed asset in the hospital premises. This project as a whole can be divided into two parts: Good fixed asset management procedures can greatly enhance the efficiency with which a department produces outputs. The first part gives an insight about the fixed asset management, depreciation, depreciation methods and its various aspects. It is purely based on whatever I learned at S.L.Raheja (A Fortis Associate). One can have a brief knowledge about fixed assets and all its basics through the project. Depreciation has become inseparable part of financial management which ensures that a change has been made to the revenue to represent the service rendered by fixed assets, and presents a true & fair view of the state of affairs of the company as required by law for the time being in force.

All the topics have been covered in a very systematic way. The language has been kept simple so that even a layman could understand. All the data have been well analyzed with the help of charts and graphs. The second part consists of data and their analysis. The data collected has been well organized and presented. Hope the research findings and conclusions will be of use.

CHAPTER 2 OVERVIEW AND COMPANY PROFILE

CHAPTER 2.1 BACKGROUND OF THE COMPANY


S. L. Raheja (A Fortis Associate) Hospital is a 140 bedded, multispecialty facility that provides comprehensive & affordable care to patients suffering from various ailments. Known widely as a leading hospital for advanced management in Diabetes & Oncology, the hospital is poised to develop as a centre of excellence in Diabetes, Oncology, Trauma, Cardiac Sciences, Emergency Services and critical care under the professional management of Fortis healthcare. Fortis group acquired S L Raheja hospital, after it signed an operation and management (O&M) agreement with the 140-bed multi-specialty hospital at Mahim on April 06 2009. According to the press release This is the second hospital to be taken over by Fortis Group in Mumbai. Earlier, it had taken over the Hiranandani hospital in Navi Mumbai. Fortis had acquired this tertiary care hospital for Rs 25 crore in 2007. The Mumbai projects are part of the groups plans to have a total capacity of 6,000 beds by 2012. S. L. Raheja (A Fortis Associate) Hospital is committed in improving the health of the society, in general. The hospital provides home care facility for chronic/terminally ill patients. For every case, concerted effort is made by each employee, not only to treat diseases, but also prevent them. By frequently conducting various health check-up camps & awareness sessions, the hospital aims to educate the public on various health hazards & their treatment. Director for the Mumbai Zone for Fortis Healthcare Ltd and CEO of S.L.Raheja (Fortis Associate) Hospital, Mumbai since March 2009 is Mr.Manpreet Sohal.

CHAPTER: 2.2 COMPANY PROFILE

Name of the company: S.L.RAJEHA (A FORTIS ASSOCIATE) Address of Registered Office: Raheja Rugnalaya Marg, Mahim, Mumbai, 400016 Location and Address: Raheja Rugnalaya Marg, Mahim, Mumbai, 400016 Tel No: 022 - 66529624, 66529999, 66529683 Fax No: 022 - 24449418, 24443893 Year of Establishment at Mahim: 1982 Board of Directors: Executive Chairman - Malvinder Mohan Singh Mr. Shivinder Mohan Singh - Executive Vice Chairman Mr. Sunil Godhwani - Non-Executive Director Mr. Balinder Singh Dhillon - Executive Director Mr. Harpal Singh - Non-Executive Director Justice S. S. Sodhi - Non-Executive Independent Director Mr. Gurcharan Das - Non-Executive Independent Director Bankers: (1) HDFC Bank Limited (2) AXIS Bank Stock listed: Bombay Stock Exchange Ltd &National Stock Exchange of India Auditors: K.N. Gandhi & Co Website: www.fortishealthcare.com

A] VALUES

Cutting edge technology, international standard treatment, affordable cost all delivered with a liberal dose of care & concern. The perfect prescription for faster cure. 1. Offer international standard of quality at a reasonable cost. 2. Care with human touch. 3. Maintain a high standard of awareness towards social issues, environment and ecology and contribute towards the quality of life of the present as well as the future generations. 4. Maintain mutually beneficial relationships with other agencies involved in healthcare and related areas, both governmental. 5. Support healthcare research.

B] VISION & MISSION


We at S.L. Raheja Hospital believe in the motto, care in tune with tomorrow. To this end we attempt to provide more than just the best possible medical treatment to our patients. Our faith lies in the miraculous power of the human touch. In keeping with this faith, our patients are treated with plenty of personal care along with medical expertise. Our motto, care in tune with tomorrow, makes us invest equally in technology as well as healing techniques. Our aim is to combine expertise, state-of-the-art equipment and care to provide our patients with the best cure possible. VISION - To be a leader in healthcare services. MISSION To provide quality care in key specialties exploiting the full potential of technology with medical and managerial expertise. . Care in tune with tomorrow.

C] HIERARCHY

Hierarchy of Finance Department

Chief Executive Officer

Financial Controller

Finance Manager

Assistant Manager

Senior Executive

Executive

Officer

Clerk

D] BRANCHES OF S.L.RAHEJA:
The Fortis hospital (India) network is central to the mission of making quality healthcare services widely available to the community at large.

Within a little over 8 years, Fortis Healthcare (India) has grown as one of the largest and internationally recognized healthcare chain. Following the recent acquisition of the Escorts Healthcare system, the Fortis-Escorts Cardiac System today ranks among the largest cardiac networks in the world. The Fortis Healthcare (India) network encompasses 48 running hospitals (including 13 satellite/heart command centers) with several more already in the pipeline. All part of grand plan to deliver world-class medical care with
compassion across India.

FORTIS HOSPITAL - GURGAON Fortis Hospital Gurgaon Set on a sprawling 11 acre plot in the heart of Gurgaon, Fortis Hospital is a multi super-specialty hospital and a perfect wellness destination under a single roof.

Fortis Hospital, Shalimar Bagh, New Delhi Fortis Hospital, Shalimar Bagh, is a leading hospital providing wideranging healthcare services encompassing clinical excellence and focused patient care, together with training of health professionals.

Fortis Hospital & Kidney Institute - Kolkata Fortis Hospital and Kidney Institute is the only hospital in Eastern India which is dedicated to kidney care. Over the years, it has matured as a super specialty hospital devoted to nephrology and urology.

Fortis Hospital Mulund - Mumbai At Fortis Hospitals technology blends with clinical expertise, personalized care and an innovative approach towards solving complex medical issues, which form the cornerstones of our patient centric services.

Fortis Hospital Mohali The Fortis Hospital at Mohali in Punjab currently has 7 operation theaters and 215 operational in-patient beds, with installed capacity for up to 300 beds was the first facility of its kind in the region. It is one of the internationally recognized hospitals in India and amongst other specialties; it runs the largest Cardiac Program in North-West India.

Fortis Escorts Hospital NEW DELHI The Escorts Heart Centre, New Delhi is a 45-bed super-speciality cardiac centre. The hospital has 45 operational inpatient beds, with installed capacity for up to 50 beds. The hospital also provides cardiac emergency services. Fortis Hospital kalyan At Fortis Hospitals technology blends with clinical expertise, personalized care and an innovative approach towards solving complex medical issues, which form the cornerstones of our patient centric services. Fortis Hiranandani Hospital, Navi Mumbai At Hiranandani Fortis Hospital, the medical team comprises of highly experienced consultants in all major specialties. The skilled doctors, nurses and paramedics are supported by modern facilities to ensure that each patient receives the best medical care round the clock

CHAPTER: 3 INTRODUCTION OF THE PROJECT


Fixed Assets (Definition) Fixed asset is an asset held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business. Fixed assets often comprise a significant portion of the total assets of an enterprise, and therefore are important in the presentation of financial position. Furthermore, the determination of whether expenditure represents an asset or an expense can have a material effect on an enterprise's reported results of operations. What is a fixed asset? A fixed asset is an asset which possesses a physical form and which is intended to be used in the business on a long term basis in order to earn income or to produce outputs. A fixed asset should have the following characteristics: It should be able to provide services or benefits to the entity that uses it; It should have an estimated useful life of greater than one year; It should be used by the entity in pursuit of its objectives; and It should be under the control of the entity so that the entity benefits from it. There is a risk in value of fixed assets because of their long life. Fixed assets can be divided into two parts that is:Tangible Assets Building, Plants, Machineries etc. Intangible Assets Goodwill, Patents etc. Fixed Asset ClassificationsFixed Assets are classified according to the following major categories: Land & buildings, plant & machinery, transport, office equipment, furniture & fittings, computer equipment, non-technical equipment, biomedical equipment.

(i) (ii) (iii) (iv)

FIXED ASSETS MANAGEMENT


Fixed Asset Management is commonly defined as the full life-cycle management of fixed asset in order to maximize their contribution and value add, i.e. from the initial planning stages right through until assets need to be disposed off/ replaced.

It is therefore involves process of planning & monitoring of physical assets during their useful lives. It requires an appropriate level of management interest & concern & accountability that is maintained well beyond the ribbon cutting stage or acquisition. The main objective of fixed asset management is to achieve the best possible match of assets with service delivery strategies & for assets made available to be given due care in order to maximize their service potential. The project topic FIXED ASSETS MANAGEMENT clearly mentions the deduction in the expenditure costs, which are in connection with those fixed assets, which are not used in the operational process. Thus disposal of such assets which are idle or not used in the production process can save money as they can deduct the expenditures such as Repairs and Maintenance to these assets, Depreciation on these assets, Interest charges in case the assets are acquired by borrowed capital, etc.

The project on Fixed Asset Management mainly focuses on discarding or removing of those Fixed Assets, which are not used in the current operational process or which are idle. The project also concentrates on those assets, which are high on the maintenance cost. It mainly focuses on identification and then disposal of the assets which are idle or which are frequently under repairs eventually increasing the operating cost for production. It also provides information about the procedure of disposal or transfer of fixed assets.

IMPORTANCE OF FIXED ASSET MANAGEMENT


(1) (2) (3) (4) (5) (6) (7) Eases the burden of the company management on asset tracking. One time exercise of uploading and coding the existing assets brings better control. Perpetual updations of asset movements and additions into the asset management system help keep the asset records online. Real time reporting and asset tracking. Depreciation calculation made easier. Provision to measure effective usage of IT assets through special tools. Excellent cost benefit ratio

CHAPTER3.1 A] OBJECTIVES OF THE STUDY:


The objective of this present exercise is to study & analyze policies and practices in relation to depreciation in company sector of our country with specific reference to Hospital industry. More specifically, the study focuses the following questions: To find out the growth rate of fixed assets over the period of study; To analyze the impact of fixed assets on sales and profit margin; To determine the efficiency with which fixed assets are utilized in a business; To know the adequacy of depreciated funds and depreciation; To find out the Hospital in our country follows uniform basis for charging depreciation. To check whether the method and the rates of depreciation for the Fixed Assets is appropriate To ensure Fixed Assets availability where and when needed. To track fixed assets for the purposes of financial accounting, preventive maintenance, and theft deterrence. The study is conducted to evaluate Fixed assets performance of S.L.Raheja. The study is evaluate is giving adequate return to the company.

B] SCOPE OF THE PROJECT:


The survey on the Project Topic fixed asset management is done by investigating about the different Fixed Assets in S.L.Raheja Hospital situated at Mahim. The study of Fixed Asset Management will help to know which fixed assets are is not in active use or idle or which are stated at the lower of their net book value. Also it helps to know which assets are having more repairs and maintenance costs and Disposal of such Fixed Assets. This project report may help the company to make further planning and strategy. The scope of present study is defined below in terms of units covered, concepts used and period under study. S.L.RAHEJA HOSPITAL (A FORTIS ASSOCIATE) has been selected for my research.

Assigning proper values to fixed assets and controlled items is critical to maintaining accurate accounting records. Depending upon the classification of the asset (land, buildings, improvements, equipment, vehicles, or infrastructure), the information required to establish and properly record asset values will come from various organizations or departments. Therefore, there will be shared responsibilities. While other City organizations may provide supporting information, it remains the ultimate responsibility of each Department Fixed Asset Coordinator (DFAC) to ensure that the proper and complete valuation has been recorded for each asset in the departments Fixed Asset Management System (FAMS). This procedure applies to all City departments and City employees, regardless of classification or function. All City managers and employees shall exercise the utmost care and diligence in the use, maintenance, and protection of all assets.

Also it helps to know the accounting of the fixed asset in case of acquisition, retirement or replacement of the Fixed Assets. It also provides the information regarding the impairment of the long-lived fixed assets. The project has also reviewed the procedure for disposal or replacement of Fixed Assets. This project report may help the company to make further planning and strategy.

C] SALIENT CONTRIBUTION OF THE PROJECT:


The salient contribution of the project on Financial savings through fixed asset management to the company is as follows: It will provide the knowledge regarding the current scenario of the company as well as provides a competitor analysis of the fixed assets of the company. It will provide information to the management of the company to make strategies and planning regarding the disposal of the fixed assets. It will help the management to get idea about those Fixed Assets that are obsolete or kept idle. It will also provide information regarding those fixed assets, which are costing heavy on the maintenance.

CHAPTER: 4 METHODOLOGY
This project is the desk study done through primary research and secondary sources.. Extensive library research and spanning through many books, journals, magazines, hand books on the subject of Fixed Asset Management, has made my project complete. Information is gathered through asking some questions to the Financial Controller, and referring to various books and websites mentioned in bibliography and webliography.

ACCUMULATED DATA

PRIMARY DATA

SECONDARY DATA

HOSPITAL-FINANCE DEPARTMENT VVISI VISIT BOOKS COMPANY FILES WEBSITES

CHAPTER 5 CONCEPTS RELATED TO FIXED ASSETS


(1) AssetAny physical object (tangible) or right (intangible) having a money value an item is sources of wealth, expressed in terms of it a cost or less frequently some other value; hence any cost benefiting a future period. (2) Fixed AssetsFixed assets imply properties of permanent nature by means of which the concern is carried on & which are held for the purpose of earning income & not for the purpose of resale. In other words Fixed Assets are those properties, tangible or intangible ( i.e. Fixed tangible assets means these properties perceptible to the senses as having physical substance like land, building, plant & machinery, equipments, furniture & fixtures, drawings etc. And assets is intangible if its value besides not in physical properties of the assets itself, but in the right which its possession confers upon the owners like goodwill, patents) which business has acquired for use in producing goods or services & which are not for resale so long as they are serviceable. (3) Current AssetsCurrent Assets mean items of value, including cash, which, where not cash, can be immediately or in the relatively short term, certainly within the accounting period (year), accessed & turned into cash. (4) InvestmentInvestment refers to disbursement of cash in order to acquire a fixed asset; as the purchase of fixed asset is an investment not a cost.

(5) Asset Manager/OfficerIt is the officer who is responsible for managing the electronic fixed asset register & associated management system. (6) CustodianAnyone who is responsible for the proper care, use & day-to-day maintenance of a fixed asset. (7) DepreciationDepreciation is nothing but difference between the original cost and the probable break-up value would represent the loss to be suffered by the business organisation on account of use of such assets. Depreciation is an accruing loss of value which begins with cost now and ends with scrap value at the end of Fixed Assets useful life.

CHAPTER: 6 OVERVIEW OF THE PROCESS


The basic phases of the fixed asset management process are: Determine fixed asset needs; create a plan to fill those needs. Establish the nature, scope, and location of fixed asset management in the organization structure.

Identify, document, and implement the policies, procedures, and controls needed to implement the plan. Purchase the assets.

Receive, inspect, inventory, store, and distribute the assets Repair and maintain the assets.

Dispose of damaged, obsolete, or unneeded fixed assets. Record and report fixed asset transactions.

Monitor and evaluate the fixed asset management process.

6.1 OVERVIEW OF DEPARTMENTS


Departmental Study of SLRH Purchase Department Ownership: Hospital Purchase department run by hospital. It has not been out sourced to any external agency. Scope of Hospital Purchase department: Studies have estimated that materials in larger hospitals accounted for more than 40 per cent of total hospital budget. Material management encompasses acquisition, shipping, receiving, evaluation, warehousing and distribution of all goods, supplies and equipment for an organization. In SLRH nursing units, laboratory, X-ray and other department make their own purchases, negotiate prices and maintain their own inventory. Purchasing is decentralized in SLRH Activities for placement of orders Purchase records Purchase reports Maintenance of vendor relationship Forecasting and planning Checking invoices and Inspection

PROCEDURE IN PURCHASE DEPARTMENT


Requirement from user department

Purchase Department

Send ENQUIRY to the Vendors

Get QUOTATION from Vendors

Study and compare the Quotation with our cost Payment to Vendors

Negotiate the Quotation to fix the price

Place the ORDER to the Right Vendor Follow up with the vendor

Finance Department

Get the Material GRN Challan Invoice

Inspect the material

Stores Credit the material

PURCHASE CYCLE

P Request

Follow up PO Acceptance
PO

Other User Department

Supplier

Enquiry

PO
IR

Purchase Department

Quotation

PO Goods

Stores
Inspection Report

Accounts Department
Payment

GENERAL STORE DEPARTMENT


Functions Raw materials that are required in the production are store in stores. Indent is made for the material required by the department. Purchase Requisition is received from the department and the demand is send to purchase department. The purchase department will give the order for the material. The material will be received in the general stores and the verification of quantity is done by general stores and quality is verified by respective department. If the material is not according to the demand or the requirement than it is rejected and for that purpose rejection note is prepared and material will be returned to the supplier.

GRN (Goods Received Note) - A record is also kept for stock and the non-stock items. For the stock & non-stock items, it is directly delivered to the concerned department requiring those goods. For the stock items, a GRN (Goods Receipt Note) is prepared which states the name of supplier, the date on which is prepared, the GRN Number, the description of the items as mentioned in the supplier bill along with its quantity ordered, the P.O (Purchase Order) number & name of department to which it will be forwarded. However, a separate GRN is maintained for stock & non-stock items. The original GRN clipped with the PTS (Purchase Transmittal Slip) & material requisition note, while the duplicate copy is kept with receiving office.

ACCOUNTS DEPARTMENT
INTRODUCTION: This company has finance cum account department which is mainly deal with all transactions like wages, salary, expenditure, making Challan and invoice, all receipt and payments etc. all this activity is done in TALLY system and through this system all accounting report access at all locations of S.L.RAHEJA. OBJECTIVES To reduce cash transactions To record and maintain all monetary transactions of unit in SAP

To provide required schedule for fund To provide necessary information to all internal and external customers. To provide MIS report monthly to management for accurate decision making To prepare annual revenue budget for proper control To create cost control awareness by providing training. FUNCTIONS 1. Accounts payable management Invoice Verification Payment scheduling Disclosure Bank reconciliation Vendor reconciliation Budget 2. Cash Management Cash reconciliation IOU reconciliation Fund Management Statutory Payment 1. Accounts Payable Management Invoice verification Invoices are verified against the purchase orders made. The quantity and quality of the materials received as per the purchase order or not is seen. If materials are not according to the purchase order made then amount is deducted and then payment is made. Invoices are also verified for the duties charged or whether CENVAT credit is received or not or whether that material is excise able or not. Payment is only made after the detail verification of invoice. If the material sent is rejected then quantity rejected is deducted from the actual quantity and payment is made for the approved material. Payment Section & preparation of Cheque Payment is made to the vendors as per the auto scheduling of Overdue invoices. As the name suggests, this section of the finance department makes the payment of all. In case of stock & non-stock items payable section received GRN (Goods Received Note) On the basis of GRN received, the purchaser scarched and clipped with the respective GRN & the same is forwarded to manager for his signature & cheque is then accordingly printed & sent to the respective head of the department. Separate files are maintained for open purchase orders, one time purchase orders.

Vendor Reconciliation If any payment is due even after the due date then the ledger balances is reconciled if money is not received by the vendors. Disclosure Acknowledgement from the vendors is received by the accounts Department. Accounts department verify about the payment made whether it is received by the vendors or not through this acknowledgement. Bank Reconciliation Bank book and pass book is maintained is by the accounts department. Difference in bank charges is reconciled by the accounts. Budget The expenses which are incurred for production, the estimation of these expenses is sent by various plants to the accounts department. After getting estimation from the entire plants budget is prepared by the accounts department and sent to the head office for approval. 2. Cash management A certain level of cash is maintained for working capital requirement. The amount of cash maintained in the company should be neither too high nor too low. If its too low then day to day activities can be hampered and if its too high there is a risk. Cash reconciliation Cash balance is matched daily against the amount disbursed. Person to whom amount is disbursed submits a voucher as a proof of the expenses made. IOU reconciliation Any employee takes IOU for the office use or personal use. That employee submits a voucher for the amount spent and left money is returned. This amount is also reconciled against the voucher received. Fund Management Every department estimates the expense to be incurred in the coming month and gives this estimate to the accounts department. Some statutory payments like electricity bills, water bills also included in these. Accounts department intimate this to head office and ask for funds for these expenses. At the end of every month stock shown in SAP should be matched with the physical stock. Audit for that is conducted on any day in a month. Statutory Payments Statutory payments like GEB bills, water bills, and ETP bills are also made by the accounts department.

CHAPTER: 7 ACCOUNTING STANDARD 10 By ICAI ACCOUNTING FOR FIXED ASSETS


The standard deals with the disclosure of the status of the fixed assets in terms of value. The standard does not take into consideration the specialised aspect of accounting for fixed assets reflected with the effects of price escalations but applies to financial statements on historical cost basis. It is important to note that from the date of AS 26 on Intangible Assets, becoming applicable, the relevant paragraphs of this standard ( AS 10) dealing with patents and know-how have been withdrawn. An entity should disclose the following infornmation relating to (i) the gross and the net book values of fixed assets at beginning and end of an accounting period showing additions, disposals, acquisitions and the other movements, (ii) expenditure incurred on account of fixed assets in the course of construction or acquistion, and (iii) revalued amounts substituted for historical costs of fixed assets with the method applied in computing the revalued amount in the financial statements.

FIXED ASSET REGISTERFor the purposes of recording the fixed assets the proper register is maintained is called Fixed Asset Register. An adequate fixed asset register; manual or electronic, is integral to effective fixed asset management. It is the basis of a fixed asset management information system & should contain relevant data beyond that required for financial reporting.

Fixed Asset Register (FAR ) is an accounting method used for major resources of a business. Fixed Assets are assets such as land, machines; office equipments, buildings, patents, trademarks, copyrights, etc. held for the purpose of production of goods or rendering of services and are not held for the purpose of sale in the ordinary course of business. Fixed assets constitute a major chunk of the total assets in the case of all manufacturing entities. Even in the case of service entities such as hotels, banks, financial institutions, insurers, mobile /telephone service providers etc. it has become imperative to invest heavily in furnishing, equipment, and

technology to attract, and retain customers. Just as it is important for a person investing on the NASDAQ to know those investments, so it is important for a business entity to have a list of its fixed assets. A Fixed Asset Register is that list of assets. A typical fixed asset register should include the following information: Asset Definition Asset Number Asset Category Manufacturer Model Serial Number Location Department Purchase Date Purchase Price ( Cost at acquisition ) Accountable Manager Replacement Date Rate Of Depreciation Maintenance Costs

Therefore all fixed asset purchased or constructed must be recorded in the fixed asset register, maintained by the Asset Manager /Officer & will be subject to the requirements of that office with regard to item identification & other relevant details. The fixed asset register shall serve as an information system that provides reliable, relevant & timely data with which to make informed asset management decisions. The fixed asset register is linked to the accounting system using a fixed asset control account.

A] OBJECTIVES IN MAINTAINING A FIXED ASSET REGISTER (FAR):


A FAR must be kept in order to be in compliance with legislation governing corporations, companies, etc. It allows a company to keep track of details of each fixed asset, ensuring control and preventing misappropriation of assets. It also keeps track of the correct value of assets, which allows for computation of depreciation and for tax and insurance purposes. The FAR generates accurate, complete, and customized reports that suit the needs of management. A FAR also allows a company to keep track of fixed assets that are not under simple, direct control of the company. This means owned and leased assets, assets under construction, and imported assets. The FAR can also be used to aid in capital budgeting and to keep track of amount provided for Asset Retirement Obligation (ARO) in respect of each asset.

B] IDENTIFICATION OF A FIXED ASSET:


In a large corporation, the task of identifying and locating a specific fixed asset can be difficult unless numbering is scientific, systematic, and up-todate. A common problem in most companies is the improper maintenance of the FAR. Physical verification of fixed assets becomes a futile exercise unless the FAR is properly maintained.

It would be advisable to use a scientific numbering technique to identify fixed assets. The process of numbering fixed assets is called tagging. An identification number (combination of alphabets, and numbers) is written on the asset. Engraving the identification number on the asset is advisable in the case of Plant & Machinery where there is heavy wear and tear.

A tag verifies the existence of assets and their location, aids in maintenance, provides a common ground for communication between the Accounts Department and the end-users and recording the net book value of asset in case of sale / scrapping. It is not necessary to tag all fixed

assets. Land, buildings and vehicles all have independent systems of tracking in registration papers and survey numbers.

FORMAT OF FAR

Business Group

Financial Year

Asset Group code

Asset Description

Own/Contract ID

Analysis

Asset Sub Group

Quantity

Invoice No.

Invoice Date

Month/Year

WDV as of 31.03.2011

Opening Additions Balance During as on Apr-Sep 2011 01.04.2011

Additions During Oct-Mar 2012

Total Additions Apr2011-2012

Deductions during Apr2011Mar2012

Total Block before Depreciation

Depreciation %

Depreciation on Opening Block

Depreciation on Additions

Depreciation on Deductions

Total Depreciation for 20112012

WDV as on 31.03.2 012

C] Key Responsibilities of Fixed Asset Manager/ Officer1. Manage the Fixed Asset Register & ensure it is accurate, complete & reconciled to the general ledger through the fixed asset control account. 2. When triggered as a fixed asset purchase through the accounting system, ensure that the acquisition of each fixed asset is recorded with all relevant details in the fixed asset register & that the relevant accounting entries, including the fixed asset control/ clearing account , are correct. 3. Provide custodians with data from the fixed asset register on a regular basis, seeking their endorsement of the accuracy of the register for fixed assets under their control. 4. Action request for changes to fixed asset details in the fixed asset register. 5. Preside over boards of survey procedures, stock-takes & inspections of assets. 6. Arrange for tagging of fixed assets immediately after recording is completed. 7. Provide regular reports on the Ministrys fixed asset portfolio. 8. Participate in planning forums to match fixed asset requirements with program & service delivery standards & strategies. 9. Provide a meaningful description of the fixed asset to enable correct recording of the fixed asset in the fixed asset register & ensure all relevant fields are completed in the Fixed Asset Register for each asset. 10. Supervise fixed asset disposal action upon on receipt of approval. 11. Contribute to the updating of the Strategic Fixed Asset Replacement Plan.

CHAPTER 8 PLANNING FOR FIXED ASSETSPlanning for Fixed Assets is a must in modern hospital set-up of our country that each & every function is performed with the help of machines. The area of planning is not only limited up to purchase of fixed assets, but is also cover area of use as well as disposal & replacement of fixed assets. It was found in present study that planning for fixed assets covers relating to: 1. 2. 3. 4. 5. 6. 7. Purchase of Fixed Assets Use of Fixed Assets Financing of Fixed Assets Repair & Maintenance of Fixed Assets Replacement Policy Insurance Policy Disposal of Fixed Assets The following persons must participate in planning for fixed assets: Managing Director CEO Secretary Chief Engineer Chief Accountant Purchase Manager Nominee of workers Financial Controller Head of Department

1. 2. 3. 4. 5. 6. 7. 8. 9.

8.1 SERVICE LIFE OF FIXED ASSETS

The Fixed Assets depends to a large extent on the estimated life of fixed assets. For some fixed assets two types of lives are estimated, i.e. (1) Legal life or physical life, (2) Commercial life. The following points are also taken into consideration while estimating the service life of Fixed Assets in Hospitals or any other industry of our country. (1) Conditions under which it is usedThe date to which a fixed asset is put to use effect its service life. Many fixed assets can be put to alternative uses & are used under varying conditions. Usually continuous operation of a fixed asset at a high will shorter its service life. (2) The General Maintenance PolicyIf a fixed asset is kept in constant repair by granting attention to small repairs & replacement of part from time to time, it will enjoy a longer life than the one which is constantly neglected. (3) Salvage Value of Fixed AssetsConsideration is also given to salvage value of fixed of that portion of the service life already expired & also of that portion of the cost previously recorded. (4) Engineering Investigation of Fixed AssetsInvestigations of past service life & salvage affect engineering, accounting & statistical methods. The best possible forecast of the life of a fixed asset is made with the help of engineering investigations of condition covering the design & employment of such plant in the past & the extent to which such conditions still prevail in that Hospital plant. (5) Past Experience & Future Expectation-The experience of the past so far as it is still pertinent, and the expectation of the future so far as it is presently determinant of a current rate of depreciation, is not lost sight of.

CHAPTER: 9 DEPRECIATION (DEFINITION AND ITS METHODS):


Except land, all fixed assets have a limited life. During such period, due to continuous use and/or lapse of time, the value of some assets starts decreasing. Such a gradual decrement of value of assets is called Depreciation. Hence, depreciation can be defined as a decline in the value of an asset due to constant use. Since these assets have limited life, sooner or later they have to be replaced. At the time of replacement, the business incurs heavy cash outflow, which can create liquidity problem in that year. In order to avoid such problem, a fixed amount out of profit is set aside as depreciation account. By the time the fixed asset expires, sufficient amount of fund will be accumulated in depreciation account, which, then can be used to buy new asset. Hence, the process of setting aside a fixed amount as expense in depreciation account is called Depreciation.

I.

Characteristics of Depreciation
The following are some of the features of depreciation: Depreciation may be physical and functional. Depreciation is a gradual/permanent and continuous decrease in the utility value of a fixed asset and it continues till the end of useful life of an asset. Depreciation arises due to the use of assets in productive activities. The primary object of depreciation is to allocate expired cost of fixed assets against a number of accounting periods. Depreciation is charged in respect of fixed assets only i.e., building, machinery, equipment and furniture etc. Depreciation is a charge against profit. Total depreciation of an asset cannot exceed its depreciable value (cost less scrap value).

II.

Causes of Depreciation
Depreciation is a measure of reduction in the use-value of an asset. It can be physical deterioration or decrease in the market value. The primary causes of depreciation are as follows:

Wear and Tear: Due to constant use, assets get worn or torn out.

Exhaustion: Exhaustion is the depletion of some assets due to continuous use and lapse of time. In case of mines and oil wells, the continuous extraction of minerals or oil, a stage comes when the mine or well gets completely exhausted and nothing is left.

Obsolescence: Some assets are discarded before they are completely worn out because of changed conditions. This is the case when an asset becomes usefulness because of technological advancement, new invention, change in style etc. in that asset.

Efflux of time: Certain assets get decreased in their value with the passage of time. This is true in case of assets like leasehold properties, patents and copyrights etc.

Accidents: Accidents can cause depreciation in the value of the asset.

III.

Objectives of making provision for depreciation


Depreciation accounting is a must for every business for attaining the following objectives:

To ascertain net profit: Depreciation is the expense for the business. Hence to ascertain the net profit, it must be included in the total cost of sales. To depict the true financial position of the business: The balance sheet depicts true financial position of a business at a point of time. To depict the true financial position of the business the assets should be shown in balance sheet not in its original cost but at the depreciated cost. That is all fixed assets should be shown at cost less the amount of depreciation suffered by them till the date of the balance sheet.

To ascertain cost of production: Depreciation is an expense. Hence it is necessary to charge depreciation in the total cost of production to fix true sales price of the goods and service. Replacement of assets: One of the primary objectives of depreciation is the provision for the replacement cost on the retirement of original assets. To ascertain income tax: If depreciation is not charged, the operation will show more profit. As a result, the taxable income will be higher. Hence, depreciation is charged for the correct ascertainment of total taxable income. To follow the company act: According to company act, it is compulsory to charge depreciation on fixed assets. The depreciation rates as per companies act 1956 is as follows:

Accounting Standard 6 by ICAI Depreciation Accounting


This standard requires that the depreciable amount of a depreciable asset should be allocated on a systematic basis to each accounting period during the useful life of the asset and the depreciation method selected should be applied consistently from period to period. If there is a change in the method of providing depreciation, such a change should be treated as a change in accounting policy and its effecr (deficiency or surplus arising from retrospective recomputation of dereciation as per new method) should be quantified and disclosed. In case any depreciable asset is diposed off, discarded or demolished, the net surplus/deficiency, if material, should be disclosed separately. The depreciation method used and depreciation rates are also required to be disclosed in the financial statements.

IV] BASIS OF CHARGE

Every company charges depreciation on different basis & no any unit is bound to adopt a particular method for charging depreciation. In this regard, the actual practises by Hospital of our country is determined.

Name Of Assets 1.Residential Flat for doctors 2.Research & Hospital Building 3.Land 4.Research & Hospital Equipment 5.Vehicles 6.Laundry 7.Office Equipments 8.Fire Fighting Equipments 9.Electrical Installation 10.Computers 11.Furniture & Fixtures 12.Kitchen Equipments

Depreciation Rate (%) 5 5 20 25.89 13.91 13.91 13.91 20 40 18.10 13.91

CHAPTER9.1 Introduction
In our introduction to accounting for fixed assets, we described how businesses need to account for the consumption of fixed assets over time in a way that reflects their reducing value. The term given to this consumption is depreciation. This revision note explains the various methods available to calculate depreciation and highlights how subjective this calculation can be. Other revision notes provide worked example of each depreciation method.

METHODS OF DEPRECIATION CHARGES


There are several methods for calculating depreciation, generally based on either the passage of time or the level of activity (or use) of the asset..Several methods are available for computing depreciation, each of which under the appropriate circumstances achieves a proper matching of the cost of service capacity used up in the period with the revenue earned in that period. The most common methods are usually adopted by business houses for charging depreciation are: 1. Straight Line Method 2. Written Down Method 1. In straight line depreciation method, depreciation is charged uniformly over the life of the assets. In this method residual value of the asset is subtracted from its cost to get the depreciable amount. The depreciable amount is than divided by the useful life of the asset in number of periods to get the depreciation expense per period. Due to the simplicity of the straight line method of depreciation, it is most commonly used depreciation method. Formula to calculated Straight Line Method: Annual depreciation expense=Cost of fixed assets-residual value ____________________________ Useful life of assets (years)

For example, a vehicle that depreciates over 5 years, is purchased at a cost of Rs17,000, and will have a salvage value of Rs2000, will depreciate at Rs3,000 per year: (Rs17,000 Rs2,000)/ 5 years = Rs 3,000 annual straight-line depreciation expense. In other words, it is the depreciable cost of the asset divided by the number of years of its useful life. This table illustrates the straight-line method of depreciation. Book value at the beginning of the first year of depreciation is the original cost of the asset. At any time book value equals original cost minus accumulated depreciation. Book value = original cost accumulated depreciation . Book value at the end of year becomes book value at the beginning of next year. The asset is depreciated until the book value equals scrap value.

Book value at beginning of year Rs17,000(original cost) Rs 14,000 Rs 11,000 Rs 8,000 Rs 5,000

Depreciation expense Rs 3,000 Rs 3,000 Rs 3,000 Rs 3,000 Rs3,000

Accumulated depreciation Rs 3,000 Rs 6,000 Rs 9,000 Rs 12,000 Rs 15,000

Book value at end of year Rs 14,000 Rs 11,000 Rs 8,000 Rs 5,000 Rs2,000(scrap value)

If the vehicle were to be sold and the sales price exceeded the depreciated value (net book value) then the excess would be considered a gain and subject to depreciation recapture. In addition, this gain above the depreciated value would be recognized as ordinary income by the tax office. If the sales price is ever less than the book value, the resulting

Year 1 2 3 4 5

Depreciation Book Value Rs10,000*1/5 = Rs 2,000 Rs 8,000 Rs 8,000 * 1/5 = Rs 1,600 Rs 6,400 Rs 6,400 * 1/5 = Rs 1,280 Rs 5,120 Rs 5,120 * 1/5 = Rs 1,024 Rs 4,096 Rs 4,096 * 1/5 = Rs 819.20 Rs 3,276.80 capital loss is tax deductible. If the sale price were ever more than the original book value, then the gain above the original book value is recognized as a capital gain. 2. Written Down Value (W.D.V) OR Reducing balance method Depreciation methods that provide for a higher depreciation charge in the first year of an asset's life and gradually decreasing charges in subsequent years are called accelerated depreciation methods. This may be a more realistic reflection of an asset's actual expected benefit from the use of the asset: many assets are most useful when they are new. One popular accelerated method is the W.D.V. method. Under this method the book value is multiplied by a fixed rate. Annual Depreciation = Depreciation Rate * Book Value at Beginning of Year Single declining balance method:

Dn = Depreciation charge during year n I = Cost of the asset, including installation expenses a = multiplier Single Declining Balance Method

* For single declining balance method a=1/N. * N is the useful life of the asset. *Ex: For a Rs10,000 car (a 5 year asset)

CHAPTER 10 ADVANTAGES OF FIXED ASSET MANAGEMENT

Fixed assets management is an accounting process that seeks to track fixed assets for the purposes of financial accounting, preventive maintenance, and theft deterrence.

Many organizations face a significant challenge to track the location, quantity, condition, and maintenance and depreciation status of their fixed assets. A popular approach to tracking fixed assets utilizes serial numbered Asset Tags, often with bar codes for easy and accurate reading. Periodically, the owner of the assets can take inventory with a mobile barcode reader and then produce a report. Lifecycle Management means asset decisions should be made with cost consideration over the asset life from planning through the disposal.. So the entire practice of acquiring, using, and getting rid of Fixed Assets is known as Fixed Assets Life Cycle Management The specific activities and goals involved in life cycle management differs among different kinds of FIXED Assets, but generally FIXED ASSETS life cycle management makes use of best practice methods for planning, accounting, deployment, usage, and maintenance, in order to reach these objectives for the organization's collection of FIXED Assets:

Ensure FIXED ASSETS availability where and when needed. Minimize the risk of FIXED ASSETS failure or breakdown before the end of FIXED ASSETS economic life.

Maximize the return (gains) from the FIXED ASSETS. Ensure that FIXED Assets are used productively throughout the FIXED Assets economic life, and they are not wasted or idle. This may involve working with other management to improve or re-design processes that impact FIXED ASSETS utilization and FIXED ASSETS productivity. Sell or otherwise divest the FIXED Assets that are idle or unproductive. Set priorities for FIXED Assets acquisition and replacement and plan future expansion or reduction of the FIXED Asset base. Reaching these objectives requires good knowledge of: Expected gains or returns from the FIXED ASSETS. FIXED Assets lifecycle, total cost of ownership, including maintenance costs and operating costs. Advancements and the current state of technology for the FIXED ASSETS class. This is obviously true for computing FIXED Assets, of course, but is also important for, Any major FIXED Asset class based on constantly improving technologies, such as medical or laboratory equipment. FIXED Assets subject to changing requirements for fuel efficiency or emissions. FIXED ASSETS reliability and or/risks to FIXED ASSETS availability Available choices in FIXED ASSETS leasing vs. buying, and the implications of each approach in terms of upgrade/replacement flexibility, responsibility for maintenance, position either on or off the balance sheet, and potential tax liabilities and tax savings.

The FIXED Assets depreciable life and its economic life.

CHAPTER: 11 LEGAL ASPECTS OF PURCHASING OF FIXED ASSETS


The materials manager must know the legal aspects that are relevant to his profession. The Indian Contract Act, 1872 and the Sales of Goods Act, 1930 cover some of the important legal aspects. It may not be possible that the materials manager is well conversant will all the branches of law, which are essential for his profession-namely.

11. 1 INTERNATIONAL PURCHASING


The stages involved to accomplish the purchases are discussed below: (1) Most of the countries impose restrictions on the import of goods. An importer is not free to import goods of his choice. An importer cannot import goods without a valid import licence. Importers have to obtain the licence from the Government. In India, the import trade is controlled under the Imports & Exports (Control) Act, 1947.

(2) After obtaining the licence, the importer has to arrange for obtaining the required amount of foreign exchange. In India, foreign exchange is controlled by R.B.I. (3) Now the importer will be involved with foreign source of supply, manufacturing unit of his company, engineering department & Government Institutions such as MMTC, DGTD, and STD etc.

(4) Special documents are required in foreign trade. The commonly used documents are as follows : (a) (b) (c) (d) (e) Bill of lading Certificate of origin Invoice Insurance policy Marking of packages, etc.

I] Bill of Lading
It is the most important document which accompanies bill of exchange drawn under letters of credit. Having received the mates receipt, the forwarding agent will present this mates receipt at the office of shopping company and in exchange will get a document called Bill of Lading. In bill of Lading the exporter fills in the following particulars: (1) (2) (3) (4) (5) (6) (7) (8) (9) Name of the exporter ; Particulars of the goods; Marks, number of packages; The port of destination; Name of the ship; Place of loading; Freight; Name of the consignee; Date

(i) (ii) (iii)

The bill of Lading is a document in which the shipping company officially acknowledges the receipt of goods acceptable to be carried in one of its ships to the port of destination specified therein in return for the payment of freight. Thus, the B/L (Bill of Lading) is both receipt and the written contract for goods to be shipped. It is very important document of foreign trade. Importance of Bill of Lading The importance of B/L may be summarized in the following manner: Bill of lading is a semi-negotiable instrument being a document of title to the goods. Bill of lading is an acknowledgement of receipt of goods on board the ship. Bill of lading is an evidence of agreement between the shipping company and the exporter, which covers all, terms & conditions.

II] Letter of Credit


Letter of Credit (L/C) is a document issued by a banker authorizing another banker to whom it is addressed to honour the cheques of the person named therein to the extent of a specified amount. It is used in foreign trade as the most convenient mode of securing payment from the importer against the goods shipped to him. A letter of credit is open letter of request by one person, usually a merchant or banker requesting some other person or persons to advance money or give credit to a third party named therein for certain and promise that he will repay the same to the persons advancing the same or accept bills drawn upon himself for the like amount. Importance of Letter of Credit Letter of credit (L/C) plays a most important role both in external and internal trade. The reason is that exporters & importers rarely know each because of long distance. This is the most widely used method of remittance in export trade because the exporter may require assurance of the credit worthiness of the importer. For this purpose, a bank in the importing country issues letter of credit to the foreign dealer. Advantages(1) To provide absolute assuranceThe letter of credit gives absolute assurance and certainty in payment by avoiding the risk, as the bills of exchange drawn under the L/C will be

honoured. The exporter, therefore, can execute the order with greater degree of assurance & certainty. (2) To realize the amountThe letter of credit enables the exporter to realize the amount of bill quickly by negotiating it with any banker.

(3) To secure advanceOn the basis of a letter of credit, the exporter can secure advances from the bank for the purpose of taking the delivery of goods exported. (4) Security against exchange restrictionsThe letter of credit ensures security against exchange restrictions because the opening bank issues a letter of credit after having been satisfied that the exchange control regulations of his own country do not impose any restriction on the transfer of money for the purpose in questions. (5) Assurance to the importer The L/C gives an assurance to the importer the bills of exchange drawn under the credit will be honoured according to the documents required therein are duly enclosed.

III] DOCUMENTS REQUIRED FOR PAYMENT:


The exporter can receive the payment for the goods in the following three different ways: (1) Documentary Bills of Exchange In this system, the exporter of the goods draws a bill of exchange upon the importer and sends it along with other shipping documents to a banker in the importing country for presenting the bill to the buyer of goods. This bill may be of the following two types: (a) (D/P) Documents against Payment: In this case documents are to be released by the banker on payment of bills either at the time of presentation or within a specified period. If the buyer fails to make the payment, the banker is authorized to sell the goods on behalf of the exporter.

(b) (D/A) Documents against Acceptance: In this case, the banker is instructed to handover the shipping documents to the importer when he gives requisite acceptance on the bill of acceptance.

(2) Bank advances under Hypothecation of Shipping Documents In this system, the exporter of the goods can get either the whole or an agreed percentage of the value of a shipment by pledging or hypothecating the documents with a banker having branches in the importing and exporting countries. This arrangement amounts to advances made by the banker who realizes the amount from the importer. To cover the risk of non-payment on the part of importer, the banker, obtains a letter of hypothecation, which gives power to the bank to sell the goods in the open market, if required.

(3) Direct Draft or Bankers In this system, the banker accepts the bill, drawn by the exporter of goods, on behalf of the importer. After acceptance the bill is returned to the exporter who can discount the bill easily. ((((((9999kkkkkkklk

CHAPTER:12 ANALYSIS & INTERPRETATIONS RATIO ANALYSIS:


Ratio analysis is a powerful is a powerful tool of financial analysis. A ratio is defined as "The indicated quotient of two mathematical expression" and as "The relationship between for evaluating the financial position and performance of a firm.

The absolute accounting figure reported in financial statement do not private a meaning full understanding of the performance and financial position of a firm. An accounting figure conveys meaning when it is related to some other relevant information. Ratios help to summarize large quantities of financial data and to make qualitative judgment about the firms financial performance.

1. Fixed Assets to Net worth Ratio: This ratio establishes the relationship between Fixed Assets and Net Worth. Net Worth = share capital + Reserves& surplus + Retained earnings. Fixed Assets to Net Worth Ratio = Fixed asset ---------------------- X 100 Net Worth This ratio of "Fixed Assets'"' to "Net Worth" i n d i c a t e s t h e e x t e n t t o w h i c h shareholder be financed by shareholders, equity including reserves surpluses and retained earnings. If the ratio is less than 100% it implies that owners funds are more than total Fixed Assets and a part of the working capital is provided by the share holders. When the ratio is more than 100% it implies that owners funds are not sufficient to finance the fixed assets and the finance ahs to depend up on outsiders to finance the fixed assets. There is no "Rule of Thumb" to interpret this ratio but 60%to 65%is considered to be ratio in ease of industrial undertaking. 2. Fixed Assets Ratio:This ratio explained whether the firm has raised adequate long term funds to meet its fixed assets requirements and is calculated as under Fixed asset (after depreciation) _________________________ Capital Employed This ratio gives an idea as to what part of the capital employed has been used in purchasing the fixed assets for the concern. If the ratio is less than one it is good for the concern. 3. Fixed Assets as a Percentage to Current Liabilities: The ratio measures the relationship between fixed assets and the funded debt and is a very useful so the long term erection. The ratio can be calculated as below. Fixed assets as a percentage to current liabilities = Fixed asset --------------------

Current Liabilities

Fixed Assets as a percentage to Long Term Liabilities Fixed Assets Ratio a Various ratio of fixed assets to net worth is a ratio of fixed assets to long term funds which is calculated as: Fixed assets (After depreciation) ...................................................... X 100 Capital Employed

4. Total Investment Turnover Ratio: This ratio is calculated by dividing the net sales by the value of total assets i.e., (Net sales/Total Investment) or (Sales /Total Investment). A high ratio is an indicator of over trading of total assets while a low ratio reveals idle capacity. The traditional standard for the ratio in two times.

Total Investment Turnover Ratio The total investment turnover ratio can be calculated by the formula as given under: Total investment turnover ratio= Sales -------------------- x 100 Total investment 5. Fixed Assets Turnover Ratio: This Ratio expresses the number of times fixed assets are being turned -over is a state period. It is calculated ass under: Sales _____________________________ Total fixed assets (after depreciation) This ratio shows how well the fixed assets are being used in the business. The ratio is important in ease of manufacturing concern because sales are produced not only by use of Current Assets but also by amount invested in Fixed Assets the higher ratio , the better is the performance, on the other hand a low ratio indicated that fixed assets are not being efficiently utilized

6. Gross Capital Employed: The term "Gross Capital Employed" usually comprises the total assets, fixed as well as current assets used in a business. Gross Capital Employed = Fixed Assets + Current Assets

7. Return on Fixed Assets: Profit after Tax ------------------------ x 100 Fixed Assets This ratio is calculated to measure the profit after tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not, the higher the ratio the better it is for the concern.

CHAPTER: 13 CONCLUSIONS
Good fixed asset management procedures can greatly enhance the efficiency with which a department produces outputs. Regardless of whether a centralized or decentralized approach is taken, the basic components of fixed asset management are the same. Procedures should be established to evaluate and screen asset proposals.

Those developing these procedures need to consider the budgeting and expenditure control systems operated by the department. In particular, clear financial investment criteria should be established. As part of the evaluation process, financing options and lease or buy alternatives should be considered. Once the purchase or construction of an asset has been approved, the acquisition needs to be carefully planned and managed. This includes detailed specifications and cost monitoring. The attention paid to the ongoing use of fixed assets is another important aspect of asset management. Responsibility for day-to-day asset management should be assigned to those who are able to influence the level of usage. These responsibilities include training, asset maintenance and servicing, and risk management. Maintaining an appropriate management information system will help minimize costs associated with this phase of an assets life.

Fixed Assets analysis involves calculating the earnings potential, use, and useful life of Fixed Assets. Running a successful Hospital requires a welldeveloped technology and well-maintained Equipment. After doing a research on the fixed assets of S.L.RAHEJA HOSPITAL, I concluded that the company is having a huge amount of Fixed Assets amounting to Gross total of 13360.63 Cr. The company has invested huge amount in the Fixed Assets, which are having a potential of high productivity and efficiency. It is really difficult to manage such huge amount of Fixed Assets but the company management has successfully able to manage these assets.

Also the Fixed Asset Register of the company does not provide the precise information and has some errors, which are to be rectified to manage the fixed assets of the company in a better way. It was also observed that most of the assets are properly maintained and are working at its maximum efficiency. There is some equipment which need to be

disposed off or needs a replacement otherwise is well maintained. It is also concluded that the employees in the plant are not having information regarding the assets. They dont have the assets no. or the acquisition cost or the year of acquisition, etc.

CHAPTER 14 LIMITATIONS OF THE PROJECT

The Limitations that are faced during the project study are as follows: Possibility of error in the Fixed Asset information as the Fixed Asset register of the company does not give a detailed information about the fixed assets for example the quantity purchased, etc. and also there are spelling errors in the register. Management generally not willing to reveal their internal strategies regarding the Fixed Assets to combat with the competitor. So, the information, which was provided, was basic. Also management not providing balance sheet & Profit & loss A/c.

CHAPTER: 15 SUGGESTIONS AND RECOMMENDATIONS

I would like to suggest to management the suggestions and recommendations are as follows: Emphasis on Fixed Assets MGT: The company should give emphasis to Fixed Asset Management, which will focuses on Acquisition of new Fixed Assets, depreciation on the current Assets, Disposal of Fixed Assets and replacement of the obsolete Fixed Assets.

Giving Assets NumberEvery Fixed Asset should be given an assets number, which is to be written on that particular fixed asset as it is very difficult to physically locate a particular asset present in the asset register. Physical Audit There should be a physical audit of all the fixed assets in order to know, which assets is to be disposed and which is to be replaced. The Asset disposal / transfer request form should be used in case of any transfer or disposal. Giving regular reportsEvery department should give a report of all the assets with the department to the personnel in the account department who looks after Fixed Asset Management after every six months. The reporting from each department should include information of the total assets available, the assets, which are disposed off, and the assets newly acquired. Income through land

The company has a surplus land available, which should be given to some organization on lease. This will produce an income for the company. GIS ( Geographic Information System) Company should have an integrated GIS (geographic information system) to locate fixed assets.

CHAPTER: 16 BIBLIOGRAPHY
Webliography:

www.fortishealthcare.com www.wikipedia.org www.indiainbusiness.nic.in Referance Book: Fixed Asset Management- Mukesh Jainara